5 Shocking Stats About Credit Reports ~ The International Finance

Wednesday, 20 February 2013

5 Shocking Stats About Credit Reports

You see credit reports advertised all over the place; it seems you cannot go a day without being reminded of the importance of knowing your credit score. While indeed you do need to know exactly what your credit is when you go to invest, to get a job, or to make a life change, there are some things about credit reports that the advertisements do not tell you. Whether you are credit savvy or just trying to figure it all out, here are a few facts you may not know about credit reports.

1) Credit reports are updated monthly, and contain over 1.3 billion accounts.

Creditors update information on active accounts on a monthly basis, including everything from late payments and new accounts to balance changes and the removal of inaccurate or inactive information. The massive number of accounts factors in student loans, credit cards, mortgages, fixed rate loans, and auto loans, among other things. Almost sixty percent of the 1.3 billion accounts are credit cards alone. Whether it is general use credit cards (such as Visa, MasterCard, Discover and American Express) or retail store credit cards, the amount of debt that is collected in credit reports is overwhelmingly related to "plastic" purchases. Compare that to only 4% of credit reports regarding auto loans and 7% regarding mortgages. Upon closer inspection, this number makes sense due to the sheer availability and ease of attaining a credit card compared to applying for a car loan or a mortgage. However, this also means that you should be aware of how your credit card purchases (even for silly retail stores) can impact your credit score in a major way.

2) Disputes are controlled and dominated by collections.

You can challenge how accurate or valid the information on your credit report is at any time. Of the 8 million disputes that occurred last year alone, 40% of the time the information had to do with debt that was being collected. People were, in fact, 5 times more likely to dispute debt collection than a mortgage loan. While this does not mean that debt collections are laden with credit errors, it does mean you should be wary of credit collection and agencies that target people in debt. 30% of disputes (or 3/4 of disputes regarding debt collection) are submitted by credit repair organizations targeting collections. Be careful which agencies you trust and who you ask to handle credit reparations.

3) Not nearly enough people are claiming their credit reports annually.

The Consumer Financial Protection Bureau's data suggests that only 20% of people annually request copies of their credit reports. Of that 20%, only a fifth of people obtain their reports from the official source, Annual Credit Report, meaning that even out of credit conscientious people, 80% are getting information from the wrong source- information that can potentially be inaccurate or stemming from less than reputable places.

4) The infamous Pareto Rule (or 80/20 Rule) has no bearing on credit reports.

The 80/20 rule is a ratio for populations, like that 80% of incidents occur because of 20% of people. The example is meant to state that a majority of the volume of an occurrence stems from a small source of people or companies.

In credit reports, it is actually 76/1. 76% of all the 1.3 billion bits of information being reported come from 100 companies. While there are thousands of companies providing some form of data, major companies account for over half of the accounts, based on the variety of accounts being handles by certain major sources.

5) You generally cannot do your dispute alone.

If you are disputing information as inaccurate or incomplete with the credit bureau, only 15% can be solved without involving a lender or collection agency. That means 85% of the time, you do have to get the furnishing party involved. Asking them to take on the legally required burden of an investigation can be tricky. Know in advance who is involved in your credit endeavors, and try to be as polite/ conscientious as possible when in communication with lenders and collection agencies as possible.

This article was contributed by Chase Sagum. Chase writes about credit repair and personal finance issues/opportunities.

About Author

Amit Singh is a founder of Theinternationalfinance.com he share his immense knowledge of Finance in this blog.

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